James Bailey points out that late appeals against HMRC assessments and decisions are not necessarily lost causes.
A recent tax case (Elazoua v Revenue & Customs (2014) UKFTT 75 (TC)*) concerned late appeals against various HMRC assessments and closure notices. The First-tier Tribunal allowed the appeals despite them having been about a year too late.
The normal time limit for appeals against HMRC assessments and decisions is 30 days, but HMRC can accept late appeals – and are required to do so if there is a ‘reasonable excuse’ for the lateness.
Application accepted
In Mr Elazoua’s case there would not have been a reasonable excuse – delay by your accountant is not ‘reasonable’ – but when the appeals were sent to HMRC they failed to respond, and the tribunal said this could be regarded as ‘tacit acceptance’ of the appeal.
Much more importantly, however, the tribunal also said they would have accepted the appeals even if HMRC had dealt with them properly and formally refused them.
The tribunal decided that in such a case the appeals should still be accepted. Their reasoning was that it would be unfair to enforce the assessments, which were almost certainly excessive, given that Mr Elazoua and his accountant had come prepared to provide all the necessary information to settle the amount of tax actually due.
Of course, you should not delay appealing against assessments and decisions – but if you do, it is always worth trying a late appeal, especially if you have a ‘reasonable excuse’ for the delay.
What is ‘reasonable’?
HMRC accept serious illness, unexpected family crises, and postal strikes as ‘reasonable’, but they do not accept delays by accountants, pressure of work, or the fact that there is no tax actually due.
There is an interesting example of disinformation in the Appeals Reviews and Tribunals Guidance, HMRC’s book of instructions to their staff, about when to accept late appeals. Part of Paragraph ARTG2240 says:
“If the decision maker does not accept the customer’s late appeal they should tell them in writing, explaining why and telling them that if they want to take matters further they should apply to the tribunal to consider their request. The tribunal is not limited by reasonable excuse conditions and can accept late appeals, if they consider it is in the interests of justice to do so” (emphasis added).
Note the underlined words – they imply that HMRC is ‘limited by reasonable excuse conditions’, and this is how they are read by most of the HMRC staff who tend to rely on their manuals as a way of avoiding the tedious chore of reading the law they are hired to enforce.
The legislation is found in section 49 of the Taxes Management Act 1970 and says that late appeals ‘may’ be accepted ‘if HMRC agree’. The ‘reasonable excuse’ condition is referred to later and says HMRC ‘shall’ accept late appeals where there is a ‘reasonable excuse’.
In other words, they must accept late appeals with a reasonable excuse, but they can accept any late appeal.
There is probably little to be gained by arguing this point with HMRC, but the Elazoua case provides a valuable lesson in how to approach a late appeal before the tribunal. Make sure you have the necessary information to settle the appeal, and ideally send it to HMRC before the tribunal hears the appeal. If the correct tax can be determined, the tribunal is much more likely to decide in your favour.
Practical Tip :
Do not be put off if HMRC refuse your late appeal – if you ask the tax tribunal to decide, and you are able to provide the information needed to settle the appeal, the tribunal are likely to consider ‘the interests of justice’ and allow your appeal. Of course, the real planning point is to make sure you appeal within the statutory time limit!
* See McLaughlin’s Tax Case Review (May 2014)
